How Happier People Spend Their Money, Backed By (Considerable) Science

Money can do a lot of things; one of the most important is create choices.

But after a certain point, more money doesn’t make people happier. According to a 2010 study by two Princeton University researchers, “Beyond $75,000… higher income is neither the road to experience happiness nor the road to relief of unhappiness or stress.”

“Perhaps $75,000 is the threshold beyond which further increases in income no longer improve individuals’ ability to do what matters most to their emotional well-being,” the researchers speculate, “such as spending time with people they like, avoiding pain and disease, and enjoying leisure.”

In fact, to sum up this 2009 study, affluence is a weak predictor of happiness.

Because “things” only tend to provide fleeting bursts of happiness.

So if you have a little discretionary income, if you want to increase your level of happiness, how should you spend your money?

A 2011 study shows that people who feel they have little free time experience greater stress, are less active, and are less likely to less likely to help others.

Intuitively, that makes sense: When you feel too busy, it’s hard to work out, much less step up and step in.

That’s where buying a little free time can make a difference. Engaging a virtual assistant. Or a landscaping service. Or ordering in.

Spending a little money to buy a little time can make you happier — as long as you use that time to do something that will actually make you happier. Working out. Connecting with family or friends. Pursuing an interest. 

This 2017 PLOS One study shows that social and/or active forms of leisure kick happiness butt compared to passive “activities” like taking a nap, staring at your phone, or watching, say, Netflix.

So when you buy a little time, don’t think “chilling.” Think “fulfilling.”

In a 2005 study published in Review of General Psychology, researchers found that the higher the annual income, the less likely respondents were to say that material purchases made them happier.

And the more likely they were to say experience purchases made them happier. At $35,000 per year, the difference was substantial — and at approximately $125,000 per year, the difference was huge.

It’s even possible to double-dip on the experience advantage. A study published in the journal Applied Research in Quality of Life showed a major spike in happiness — lasting about eight weeks — during the planning stage of a vacation, as people enjoy the sense of anticipation.

Another study shows a boost in happiness after a vacation, as people remember the experiences they had.

And the people they enjoyed those experiences with.

Which leads to another double dip…

Regardless of how you define “friend,” few people have the time to have dozens of friends.

That’s why Dunbar feels we have different layers or slices of friends:

• One or two truly best friends (like your significant other and maybe one other person)
• Then maybe 10 people with whom we have “great affinity” and interact with frequently
• And then all sorts of other people we’re friendly with but who aren’t actually friends

 In total, Dunbar’s Number says you can have about 150 people in your social sphere.

All of which means “friend” and “friendly with” are two very different things. 

In short, the key isn’t to have more friends. Nor is it to try to have a tons of friends. The key is to have three or four really, really good friends… and then, of course, plenty of people who aren’t close friends but are fun to be around, or result in a mutually beneficial relationship, or share common interests.

You don’t need to be less friendly. You just need to nurture the most important relationships in your life.

And not just family relationships: A 2010 meta-analysis of studies encompasssing nearly 300,000 people found that friendships are actually a stronger predictor of health and happiness than relationships with family members.

But don’t stop there. Nurture those relationships, but do so as often as you can through shared experiences. Plan them in advance, so you and your friend(s) can not only enjoy the resulting shared memories but can also savor the future “consumption” ahead of time. 

As research shows, doing is better than having.

Especially when people you care about are involved.